A debate, sometimes cerebral and sometimes acerbic seems to be razing with the government and the opposition pitted on either side. Can GDP grow, without job creation, seems to be the favourite topic among the panellists. Formal employment boosts output and real income. Government budgets usually strive for creating opportunities for real employment. However, the ideal is for people to be free to choose, how much they wish to work and where they wish to work, so as to maximise their welfare, based on appropriate incentives. Employment must ensure minimum number of hours and longevity of employment. The skill dimension of employment is also very important for real income and possibly for work satisfaction. A skill Mission, that is short on delivery and a job market that is, devoid of a labour management information system, cannot fulfil aspirations of either the government or its subjects.
Economic growth is determined by the rate of increase in the labour force and productivity growth. If fewer people are working, unless there is a surge in new workers or everyone suddenly become more productive, growth slows. This is exactly what happened over the past decade or so in the United States and probably happening in our country as well. To the extent that an aging population continues to retire, lower labour force participation may be an even bigger drag on growth in the future. Read with a 65% population, below the age of 30 years, this can be a recipe for disaster.
The Telegraph reported a few days back that wage growth surged in Britain, to a three-year high in January, as families are at last feeling the benefit of the economic recovery in their pay packets. Further that the unemployment fell to 4.3 pc in the three months to January and prices slowed to 2.7 pc in February bringing down inflation. In the US, an unemployment rate that was as high as 10% in 2010, has come down to 4.1% this February when 3,13,000 new jobs were added, the highest in the last six months with impressive gains across low, middle and high wage industries. In Australia, the unemployment rate fell to 5.5% in September, the lowest, since March 2013, as the government’s schemes contributed to a surge in health jobs and the mining industry recovering from a downturn, adding 48,000 jobs over the last year.
Three success stories, in three different countries, after long periods of lull, seem to be suggesting that their economies are turning the corner. This in spite of large-scale automation, use of artificial intelligence tools, be it in Manufacture or IT. Is there a lesson for us here?
A Nation must focus on creating employment opportunities for its citizens and if that Nation is India, then advantages accrued of a young population can easily be frittered away, if contrary is the case. Policies must ensure labour-intensive light manufacturing industries, supported by a conducive investment climate which can deliver productive jobs for low-skilled workers at a large scale. SMEs can contribute a large share of employment but their net job creation rate may remain similar to large firms. Development agencies focused on job creation through SMEs should therefore target small firms that grow over a period of time. Creating wage jobs in the manufacturing and service sectors has great potential in the medium term, but increasing productivity and incomes of people in traditional agriculture can give dividends in the short-term.
The International Labour Organization in a report on World Employment and Social Outlook, released in January said, Asia-Pacific region will add 23 million jobs, in the current and the subsequent year, aided by employment growth in South Asian Nations, including India. However, we must be concerned, that 18.9 million unemployed people or 9.76% of such population worldwide is in our precincts.
Manufacturing Industry with a thrust on digital manufacturing, has undergone a phenomenal transformation in the last two decades. Large scale Automation, AI, Robotics and special purpose machine tools, have redefined job roles and rendered serval traditional ones redundant. Several manufacturers have outsourced an extent of 90% and above, their operations to other countries to be competitive in an ever-expanding competitive market. The downside seems to be loss of jobs. IT Industry, one of the largest employer in recent times, has also been staring at a local recession, where automation enables instructions to create a repeated process that replaces an IT professional’s manual work in data centres and cloud deployments. Software tools, frameworks and appliances conduct the tasks with minimum administrator intervention rendering several, professionals till yesterday, with nothing to work for today. The scope of IT automation where artificial intelligence tools are used ranges from single action to discrete sequences and, ultimately, to an autonomous IT deployment, that takes actions based on user behaviour and other event triggers. Obviously, the jobs are mutating to those that require higher order skills with required numbers going down.
In reality, a number of jobs being created are of poor quality, despite strong economic growth, that can render some 77% of workers in India, with vulnerable employment by 2019. Vulnerable employment affects almost half of all workers in Asia-Pacific, or more than 900 million men and women. The high and persistent incidence of vulnerable employment, largely reflects the fact that structural transformation processes, whereby capital and workers transfer from low to higher value-added sectors, are lagging behind in the Country.
We should be worried that, while the overall unemployment rate is expected to be around 3.5% in the years 2017 to 2019, the unemployment rate in the 15-24 age group is much higher, increasing further from 10% in 2014, projected to be 10.7% in 2019. Portents of a demographic disaster, if not acted upon.
An Indian’s overseas job and money remittances essentially depended on US, the Gulf and Australia in the main. Recent world view on jobs seems to be Country first. Trump campaigned on “Make America Great Again” and won. The idea of bringing back American jobs and frequent criticism of the outsourcing industry for replacing US workers with those from overseas and the tightening of criteria for letting foreign employees into the US, particularly through the controversial H1B visa programme, have all had a sobering effect on an already stretched intelligence worker. The Head-hunters, the leadership hiring firm, anticipate terminations will accelerate and top 150,000 or even 200,000 next year, not a pleasant projection at all.
The economic slump that we saw out of an unprecedented fall in crude oil prices and simmering geopolitical tension in the Persian Gulf, sent shock waves across the Arabian Sea. The fair winds that ferried labour and material between Arabia and India have slowed down considerably exacerbating a job scene that has been stretched to the limits with an aspirational young population. The Australian Government’s recent announcement abolishing the temporary work, subclass 457 skill visa and its replacement with a completely new temporary skill shortage TSS visa in March 2018, also has a potential to affect the Indian worker.
Instead of an assured employment in the private or a public sector, an innovative business initiative may be a way out. Netflix, for example, disrupted the video rental industry to the point that the neighbourhood video stores were rendered things of the past. In its place, people stream movies and games to their TVs and mobiles through a subscription service or an application.
Are then, entrepreneurship and start up, the buzzwords? Small businesses are often called the backbone of the economy. What is the link between entrepreneurship and job creation? For our economy to thrive, there must be competition, growth, and innovation. Successful entrepreneurs tend to be naturally competitive, think out of box, and see through many of the easy answers. If in the process, a debate on marketing “Pakodas” takes centre stage, can it not be seen as a market disruption? If a Start-Up that researches Pakodas or its varieties in different countries, explores different frying methods, markets them through an innovative campaign, creating a supply chain of “Pakodas-to-home” along the way, can it not trip the Mc Donald’s and the like? New businesses may start thriving by bringing an existing product to a new group of customers, but at some point, they will begin to draw customers away from other businesses if they are going to succeed. Certainly, a new way forward.